Broadband ‘Vouchers’ Won’t Help Rural America Connect; So What Will?

A proposal from a former FCC staffer would destabilize rural America’s broadband infrastructure and discourage investment. Instead, the Federal Communications Commission should focus on modifying the current Universal Service Fund, according to the CEO of a national association representing rural broadband providers.

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Recent events have put rural America and our country’s ability to bring broadband to rural locations in the spotlight. As part of this broader conversation about rebuilding rural America, one question keeps rising to the top: how best can those in charge of telecom policy address connectivity needs that will only grow in the coming years?

Former FCC staffer Jonathan Chambers recently argued in a Daily Yonder “Speak Your Piece” that the federal Universal Service Fund, which helps both in deploying and sustaining telecom networks in high-cost rural communities, should yield to a concept of portable subsidies that follow the consumer. While presented as a bold new idea, this concept is actually something that was debated and rejected in the past. It is a revival of the “phone vouchers” idea that was discarded back in the 1990’s in the debate surrounding the Telecommunications Act of 1996.

Specifically, some suggested during that debate that if every rural household were given a voucher worth $X, providers would compete to serve that customer. But as a broad bipartisan consensus recognized, that notion is fundamentally at odds with network economics. In an area that cannot support the operation of one network due to vast distances and low densities, the idea that multiple networks will emerge to compete for customers is misguided.

Ask those most familiar with rural infrastructure projects—not just rural telecom companies, but rural electric cooperatives or rural water operators—if they could justify building a significant, multi-million dollar system on the prospect of individual consumer vouchers, and they would tell you that’s impossible in most, if not all, deeply rural areas where densities are a handful of subscribers per square mile (or less). This is why we have electric rate bases that provide specified returns for electric cooperatives from rural consumer rates. And that’s why in the more deregulated telecom industry, policymakers support networks through universal service support in rural areas. If you did something drastic like eliminating the ability to recover costs from customers through a regulated electric rate base, or if you moved to a voucher system in the telecom space, the rural infrastructure system quickly falls apart.

What was wisely rejected before should therefore be rejected yet again today. So what then should we be looking to do as a nation? We should be looking—as the FCC has been looking—to build upon the successes of the current universal service support mechanisms. These programs have been increasingly repositioned toward broadband, better directed toward where support is needed to justify and sustain network investment in market failure areas, and provides substantial accountability in terms of identifying where universal service dollars have gone to deploy broadband to specific locations.

This is not to say that the current system is perfect, or that it’s “mission accomplished” on rural broadband. Community-based broadband companies like those in NTCA’s members have certainly established a strong track record of success based on these support mechanisms. NTCA already recognizes more than 100 companies as Certified Gig-Capable Providers, delivering internet speeds of up to 100 times faster than those currently available in many U.S. households, and our Smart Rural Community program is now in its sixth year of awarding cutting-edge telecom providers that use broadband technology to power innovative economic development, education, health care, government services, safety and security, and more efficient energy distribution and use.

Shirley Bloomfield

But there are still many consumers to be reached, and even the sustainability of the substantial successes to date are at risk if certain issues aren’t addressed soon. For example, if the FCC doesn’t adjust the levels of support for rural broadband—a budget that has been flat for seven years—it will be difficult, if not impossible, to make a meaningful dent in the outstanding broadband gap or to make sure that the networks being built remain in place and capable of serving consumers. We are already seeing the effects of this lack of support, as rural Americans still need to pay tens or even hundreds of dollars more per month than their urban counterparts for the same broadband services even after the FCC’s reforms, while we also see tens of thousands of rural consumers denied reasonable broadband speeds because of the long-time capped fund.

As policymakers seem to recognize as they talk about infrastructure policy, such a change isn’t just about rural America. This isn’t about strengthening only certain regions of the United States. It’s about strengthening the entire country. That’s because investments in rural broadband don’t just help to make rural America strong; they boost the rest of the country as well. A recent Hudson Institute report showed that the impact of rural telecom investment extends to all of America, contributing $24.1 billion to the U.S. economy in 2015 and supporting nearly 70,000 jobs.

Reverting to a 1990’s era “vouchers” approach for rural telecom infrastructure (or porting a similar concept to the business of building other rural infrastructure, like electric or water systems) would jeopardize this positive, pronounced economic impact, slowing network investment rather than providing the certainty that network providers need to make the investments that will ensure consumer benefits for decades to come.

While we all want to see rural America thrive, and while new ideas are always welcome about how to provide the robust broadband connections such thriving requires, we should look to how we might build upon the foundation laid by the Universal Service Fund. Working together, we can extend the gains rural telecom companies have made in delivering faster broadband speeds, building rural businesses and bolstering all of America.